The World Bank sees the Philippines outperforming China and other major Asian economies this year and next.
The World Bank said in its latest report titled “Global Economic Prospects: The Turning of the Tide?” that the Philippines was expected to grow 6.7 percent in 2018 and another 6.7 percent in 2019.
It said the country would likely continue to outperform some of the major economies in Asia such as Indonesia (5.2 percent in 2018 and 5.3 percent in 2019), Malaysia (5.4 percent, 5.1 percent), Thailand (4.1 percent, 3.8 percent) and China (6.5 percent, 6.3 percent).
Only Vietnam and Cambodia are expected to grow faster than the Philippines this year at 6.8 percent and 6.9 percent, respectively.
The Philippine economy grew 6.8 percent in the first quarter, matching the first-quarter expansion of China.
“Activity in commodity-importing economies excluding China remains strong, broadly in line with its underlying potential rate,” the World Bank said.
“Growth in the Philippines and Vietnam remains robust, but capacity constraints [e.g., high capacity utilization rates] limit further acceleration, especially in the Philippines,” the bank said.
The bank said the Philippines was among countries in the region with still-fast credit growth, along with China and Vietnam.
Growth in the East Asia and Pacific region accelerated slightly to 6.6 percent in 2017, reflecting solid exports and strong domestic demand.
The World Bank said conditions were mostly favorable for the region in 2018, including robust global trade, moderate borrowing costs and sustained capital inflows.
Global economic growth is expected to remain robust at 3.1 percent in 2018 before slowing gradually over the next two years, as advanced-economy growth decelerates and the recovery in a major commodity-exporting emerging market and developing economies levels off, the World Bank said.
“If it can be sustained, the robust economic growth that we have seen this year could help lift millions out of poverty, particularly in the fast-growing economies of South Asia,” World Bank Group president Jim Yong Kim said.
“But growth alone won’t be enough to address pockets of extreme poverty in other parts of the world. Policymakers need to focus on ways to support growth over the longer run”•by boosting productivity and labor force participation”•in order to accelerate progress toward ending poverty and boosting shared prosperity,” Kim said.
The World Bank said in a previous report the main challenge facing the Philippines was not unemployment, but the poor quality of jobs in the labor market.
The bank said investments in infrastructure and education, skills, and health were not the only key to sustaining high growth but would also ensure that poor and vulnerable families have access to better job opportunities.
The multilateral lender said that delivering inclusive economic growth through good jobs remained the country’s most pressing challenge.
The World Bank’s Philippines Economic Update released in April said that in 2017 the Philippines was among the top three growth performers in the region. Monetary and fiscal policy supported this growth performance.
“The Philippine economy will remain strong, projected to grow at an annual rate of 6.7 percent in both 2018 and 2019. The economy is currently growing at its potential, making productive investment in physical and human capital essential so that the economy can continue to grow along its current trajectory,” it said.
Released twice a year, the PEU also flagged potential risks that could affect the growth prospects of the economy.
Birgit Hansl, World Bank lead economist, and program leader for equitable growth, finance and institutions for Brunei, Malaysia, the Philippines and Thailand, said there were several domestic risks facing the Philippines, including increasing inflation and an overheating of the economy as well as high fiscal deficits.
She also said that slow progress in the medium term to implement structural policy reforms that would increase investment and create quality employment could prevent the Philippines from achieving more inclusive growth.